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Jul 22

Robert Mundell

Robert Mundell (born in 1932) is a Canadian economist and professor at Columbia University. He won the Noble Prize in Economic Sciences in 1999 for his theory in optimum currency areas, which focuses on a series of characteristics required so that monetary unions can be optimal, and therefore sustainable and economically efficient in the long run, as stated in his paper “A Theory of Optimum Currency Areas”, 1961. He raised special interest amongst European economists due to his support for the creation of a European Monetary Union and of the Euro.

He is a strong defender, and one of the developers, of supply-side economics that argues that economic growth will be most effective if it’s originated by supply-side policies.

Mundell and Marcus Fleming, from papers written separately by the two authors, designed the Mundell-Fleming model, -also called IS-LM-BoP model-, through which they expand the traditional IS-LM model into a context of an open economy. This model explains why there cannot be an economy with an independent monetary policy if it maintains a fixed exchange rate, and there is free movement of capital and payments; this situation is known as the “impossible trinity”. Mundell’s paper “Capital mobility and stabilization policy under fixed and flexible exchange rates”, 1963, analyses the case of perfect mobility of capital.

Given his contributions and thoughts about monetary policy, it can be said that Mundell belongs to the Chicago School and is a fervent supporter of an open economy, in the trend of globalization.

Jul 22

Lope Gallego

Robert Solow

Robert Merton Solow, born in 1924, is an American economist, pupil of Wassily Leontief, and Professor at the Massachusetts Technological Institute (MIT). We can identify Solow as a supporter of the Neo-Keynesian ideas and a great user of mathematics for supporting economic theories.

Most of his works and theories are based in the theory of economic growth, topic that he has studied and analysed thoroughly. In 1987 he was awarded with the Nobel Prize in Economic Sciences, for his works on economic growth. Solow believes that technological progress is a critical factor in economic growth.

In the Solow–Swan growth model, he determines long term economic growth using productivity, capital accumulation, population growth and technological progress, as main variables. Solow sustains in his paper “A Contribution to the Theory of Economic Growth”, 1956, that savings play a key role in economic growth, both as a positive factor, since it allows further investment, but also as a negative issue, since it can diminish the welfare of economic agents by diminishing consumption.

Jul 22

Lope Gallego

Paul Krugman

Paul Robin Krugman is an American economist born in 1953, who is identified with the New Keynesian Economics theories. He is an experimented lecturer and is actually working as Professor at Princeton University teaching both Economics and International Affairs.

He has published articles and papers in different newspapers and journals, and collaborates in the New York Times on a regular basis. It is thanks to Krugman’s communication abilities and his numerous publications, that he has become an international reference.

Krugman is best known for his research on international trade. He was awarded the Nobel Prize in Economics Sciences in 2008 for his work regarding the interpretation of patterns of international trade. He has broadened the general understanding of economic phenomena such as trade and the location of economic activities. In his paper “Increasing Returns, Monopolistic Competition, and International Trade”, 1978, Krugman sustains that trends and arrangements of international trade, and also the geographic congregation of wealth, can be explained by economies of scale and by consumer’s preferences for goods and services.

Mar 29

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Alvin Harvey Hansen

Alvin Hansen Hansen was an American economist (1887-1975), professor at Harvard University and one of the main precursor of the New Economic Science or Keynesianism, in the U.S. In fact, Hansen is known for popularizing the IS-LM model.

Hansen, heavily influenced by the psychological environment of the Great Depression, also addressed the concept of steady stateand long-term stagnation.

Mar 29

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John Richard Hicks

John R. Hicks

John R. Hicks was a British economist (1904-1989), professor at the London School of Economics, Cambridge University and University of Oxford. He took special interest on issues concerning microeconomics, growth, economic fluctuations and monetary theory. In his most famous work “Value and Capital”, 1939, Hicks referred to aggregation problems, interest rate, etc. It was also in this book where he developed further the comparative statics, the analysis in economics when describing two possible outcomes. His book “The Social Framework: an Introduction to Economics”, 1942, is a veritable treatise on structural analysis by means of social accounting.

However, Hicks is mainly known for the development of a general equilibrium model, based on J. M. Keynes’ “General Theory”, in which he analyzed four markets: goods, labor, credit and money, called the IS-LM model. This model, firstly named IS-LL, appeared in his article “Mr. Keynes and the Classics: a Suggested Interpretation”, published in 1937 in the journal Econometrica.

He was awarded the Nobel Prize in Economics in 1972, along with Kenneth Joseph Arrow, for his contributions to general equilibrium theory and welfare economics.

Mar 29

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John Maynard Keynes

Keynes was a British economist (1883-1946), son of the economist and methodologist John Neville Keynes. J. M. Keynes first gained notoriety with his work during the Versailles Peace Conference, when he cleverly proposed in his book “The Economic Consequences of the Peace”, 1919, not to punish Germany to avoid future retaliation. Later, during the Great Depression, he fought the conservative views advocating for a restoration of the gold standard in the famous pamphlet “The Economic Consequences of Mr. Churchill”. After a series of papers on monetary issues, he published in 1936 the most important of his works, the “General Theory of Employment, Interest and Money”, which was the foundation of the then called New Economic Science, or Keynesianism. Keynes’ main thesis was that unemployment during the Great Depression was the result of the decrease in effective demand. Therefore, to achieve full employment, it was necessary to revive the economic system through public investment. In the last years of his life, J. M. Keynes participated in the negotiations of Bretton Woods, in 1944, leading to the creation of the International Monetary Fund.

At the Bretton Woods conference, where he was part of the British delegation, he raised the idea that the IMF should be constituted as a true worldwide central bank, capable of issuing paper currency for international payments, for which he proposed the name “bancor”. Most of the ideas mentioned in the “Keynes Plan” were not followed through, since they competed with the U.S. proposals specified in the “White Plan”.

Great disciples of Keynes, part of the Cambridge School, were Joan Robinson, Nicholas Kaldor and John R. Hicks, to name a few.

Mar 27

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Anne-Robert-Jacques Turgot

Turgot Turgot was a French abbot (1727-1781), Baron de l’Aulne, who after leaving the clergy became an economist and stateman, and author of the book “Reflections on the Formation and Distribution of Wealth” published in 1776. One of the great Physiocrats, and student of François Quesnay, was the first to clearly formulate the law of diminishing returns. Turgot was an early supporter of trade and economic liberalization, this being the main reason of his great influence on Adam Smith.

Mar 22

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Arthur Cecil Pigou

Arthur Cecil Pigou Pigou was a British economist (1877-1959), disciple of Alfred Marshall, whom he succeeded as a professor at Cambridge. Pigou is remembered above all as a precursor of welfare economics, for his books “Wealth and Welfare”, 1912, and “The Economics of Welfare”, 1920, in which he used measures of national income and its distribution in order to understand how wealth and welfare are related. He is also remembered for making a distinction between different degrees of price discrimination.

Being part of the Cambridge school, Pigou used common tools derived from neoclassical economics, such as marginalism, amongst others.

Mar 22

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François Quesnay

François Quesnay Quesnay was a French physician (1694-1774), who also studied economic issues, and was the true founder of the economic doctrine known as Physiocracy. His early works were written in the Encyclopédie of Diderot and d’Alembert (1756,1757). However, his most important contribution to economics was his famous Tableau Économique, 1758, the first circulatory diagram, allowing a further understanding of how an economy works. He did it by comparing the income flow of a given country to the blood in the human body.

The tableau allowed further developments in the matter, such as Léon Walras’ general equilibrium and Wassily W. Leontief’s input-output model.

Mar 22

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Alfred Marshall

Alfred Marshall was an English economist (1842-1924), and the true founder of the neoclassical school of economics, which combined the study of wealth distribution of the classical school with the marginalism of the Austrian School and the Lausanne School. Professor at Cambridge, he was the author of “Principles of Economics”, 1890, which became the most widely read manual in microeconomics in his time. This book, which is his major work, established a radical change on how economics were taught. Instead of just writing long pages, Marshall draw diagrams throughout the chapters, allowing a better understanding of economic theories and models, such as J. S. Mill’s reciprocal demand, or an analysis on the differences between fixed and variable cost, and the importance of time periods when analyzing these matters. In fact, Marshall is the precursor of today’s cost analysis.

Of unquestionable educational clarity and filled with profound social principles, Marshall contributed to economic science with concepts such as elasticity and the further development of other subjects, surpluses for instance. Although he did not invent the term nor did he initiate this theory, he did made a clearer separation and definition of different kind of surpluses, such as consumer’s and producer’s surplus.

Also in his “Principles of Economics”, he stated the differences between internal and external economies of scale, as well as a diagram which depicted the fluctuations in supply and demand that took place before arriving to a steady state, a general equilibrium. This equilibrium was reached by means of changing amounts, not prices, as Léon Walras stated.

He is also considered as founder of the Cambridge School, where he taught economics until his retirement. Other renowned economists belonging to this school are Arthur C. Pigou and J. M. Keynes.